You knew it had to come at some point, and we have advised our readers for months to raise cash and to take advantage of markets that seemingly went up every day. We noted it’s hard to just “go to cash” and hedging is expensive, but taking profits and shifting to lower volatility stocks did make sense. Most of that seems like a blur now, and just when you expect the doomsayers to show up, they are here right on cue.
Without mentioning any names, one market pundit who has been famous for outrageous calls that were wrong, said we could be on the brink of a substantial bear market, despite the fact that they rarely occur when the economy is not in recession. In fact, the economy may be poised for the strongest growth in 15 years.
Institutional investors have been for some time short volatility, and they are getting mauled, as they continued to pick up nickels in front of steamrollers. The real key is watching for the dollar to strengthen. Since our overly weak dollar is bearish for numerous reasons on a global basis, once it stabilizes and starts to trade higher against other currencies, you should see the selling slow or even stop.
Have your shopping list ready, because we screened the Merrill Lynch research universe, and found five high-dividend blue chips that should be bought for long-term investors.
This remains a top Wall Street energy pick and is down over 10% in less than a week. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
The company also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
For 75 years in a row, Exxon has raised its dividend on a split-adjusted basis. Thanks to the company’s vertically integrated model in the oil and gas business, its profitability doesn’t suffer through commodity price swings like a company that’s a pure play in one segment of the value chain.
Shareholders are paid a 3.86% dividend. The Merrill Lynch price objective is $102, while the Wall Street consensus estimate is $88.95. The stock closed Monday at $79.72.
This domestic car company could continue to benefit from the environmental disasters dating back to last summer. General Motors Company (NYSE: GM) is the world’s largest automaker, with annual volume of almost 10 million units. The company reports its operations in four regions: North America, Europe, South America and International. And it now relies on only four core brands in its key North American segment (Chevrolet, GMC, Buick and Cadillac).
General Motors also sells vehicles to dealers for consumer retail sales, as well as to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. In addition, it offers connected safety, security and mobility solutions, and information technology services. The company, through its subsidiary, General Motors Financial Company, provides automotive financing services.
Trading at an ultra-low 6.97 times estimated 2018 earnings, the stock makes good sense for investors looking for solid value. The company posted outstanding earnings this morning and is looked pretty stable in premarket trading as a result.
Shareholders receive a 3.84% dividend. The $57 Merrill Lynch price target compares with the consensus target of $44.13. The shares closed trading on Monday at $39.54.
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